A Fairer Way To Tax

So goes one of many libertarian mantras, and it embodies a core principle of liberty. Taxless libertarian nirvana is not, however, lurking around the corner, or on the next block, or even in the same hemisphere, so it’s a philosophical position more than an actual hope for policy. Thus, it behooves libertarians and liberty lovers to actually engage in dialogue on matters of taxation, rather than simply cut ourselves out of the conversation.

One such opportunity presents itself in an idea currently percolating in California: taxing drivers/vehicles on a per-mile basis. Currently, revenue is raised for road maintenance and construction via per-gallon gasoline taxes (plus tolls, plus registration fees and the like). Considered theoretically, such taxes are more “just” than many other taxes we pay, because they are connected to the use of a public good (i.e. roads, bridges, highways). Practically, however, the gasoline tax isn’t as fair or just as it could be, because there is a wide disparity in fuel efficiency, because actual wear-and-tear on the roads is not proportional to fuel consumption, and because the tax applies to gasoline used for non-public-road purposes as well. Consider that a Prius weighs the same as a Chevy Malibu, but gets almost double the mileage. And consider that a Chevy Volt, or a Tesla, or a Nissan Leaf, or any of the other plugin cars on the market pay no gasoline tax. Roads don’t care about how fuel efficient a car traveling on them is. Roads are affected by that car’s weight. An 80,000 lb tractor trailer gets 6 miles to the gallon vs the Prius’s 60, but its impact on the road is probably much more than 10x that of the Prius. A Tesla weighs as much as more than a Chevy Malibu, and thus wears the road just as much, so why should it get a free ride?

Climate change activists, fossil fuel foes, and other social engineering types will argue that government encourages high mileage vehicles by making it relatively more expensive to own gas guzzlers, but activist government is anathema to libertarian ideals. In other words, it’s not the government’s place to tell us what to buy or how to live. Taxation as social policy is incompatible with liberty.

I’ve written in the past that there are two types of taxes: fee-for-service and redistributive. There is no principle of liberty under which the government can take from A merely to give to B. On the other hand, citizens of a city, state or nation receive some basic services from government, services that even exist in libertarian versions of how the world would work, and they do need to be paid for. While coercive taxation is at odds with the philosophy, as I noted, we are very, very far away from that, and so making a distinction between types of taxes should not incite screams of “you’re not a real libertarian!” After all, it is proper that one pays for a good or service. Yes, taxation is coercive, and yes, there are non-coercive ways to pay for building and maintaining public roads, but lets be honest – our system of paying for roads and highways is not about to be radically reformed into any of those.

So, lets work on making things more just and fair within the present reality.

One problem with gasoline taxes is that the push towards more fuel-efficient vehicles harms revenues. Yes, government wants us in more fuel-efficient cars, and has for decades. In the past, it was about reducing dependence on foreign oil. But, now, with the fracking revolution, we’ve got oodles of the stuff, and so now it’s supposedly about reducing carbon emissions. So, mileage mandates continue to climb upwards. And, so, gas tax revenues have decreased even as Americans drive more (and thus put more wear and tear on the roads).

A per-mile tax, weighted for vehicle weight in a manner that best reflects a car’s impact on the road, would establish a proper fee-for-service connection between user and asset. Properly as well, there should be an exclusion for off-road use, but that’s just a detail of implementation. This is how taxation should work: people pay for the public goods they consume. The principle can be conveyed to other basic functions of government, i.e. national defense, courts and other federal-level functions, police and other municipal services at the local level, and so forth. Taxation in this manner would reset people’s thinking about taxes, government, fairness and justice, away from the “soak some to benefit others” to “we pay for what we use and for what government should be doing.”

Of course, the odds of a mileage tax replacing a gas tax, instead of supplementing it, are low. This sad reality – that taxes are applied in “death by a thousand cuts” form – is why I stand leery of the Fair Tax, which is supposed to replace income taxation with consumption taxation. Certainly, the latter would be a welcome change, and alter the entire dynamic of our country and its revenue generation. But, barring a repeal of the 16th Amendment, it’s a given that the next time a tax-loving administration and Congress took the reins of power, there’d be a reinstatement of income taxation, and we’d be getting it from both ends, the way the Europeans do. And, the devil is very much in the details. How to secure privacy, how to avoid charging for private road mileage, how to make this work at the state and local level – all real questions worthy of real debate. Questions about implementation, however, do not obviate the soundness or validity of the principle.

The reality that gas taxation is an increasingly unbalanced way of paying for roads is going to force legislators’ hands at some point. As the debate of how to pay for roads that are seeing increased use even as fuel efficiency decreases revenues comes to the fore, we should involve ourselves rather than stonewall-dismiss the idea of a mileage tax. We should demand it replace the gas tax, not supplement it. As we should do with other taxes. Taxes should be user fees, not rob-Peter-to-give-to-Paul. In the name of fairness. Fairness is, after all, a warm-and-fuzzy word to politicians, but since it’s indeed fuzzy, we need to manage what they mean when they say it.

How we tax is as important as how much we tax, or what we tax, and we should seize every opportunity to help shape that debate.

I am twice-retired, a former rocket engineer and a former small business owner. At the very least, it makes for interesting party conversation. I'm also a life-long libertarian, I engage in an expanse of entertainments, and I squabble for sport.

Nowadays, I spend a good bit of my time arguing politics and editing this website.

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